Capitalism operates only on the basis of private costs, only private costs are rewarded and repaid, and not social costs. And even in a competitive c… - Oskar Lange

Having treated the theoretical determination of economic equilibrium in a socialist society, let us see how equilibrium can be determined by a method of trial and error similar to that in a competitive market. This method of trial and error is based on the parametric function of prices. Let the Central Planning Board start with a given set of prices chosen at random. All decision of the managers of production and of the productive resources in public ownership and also all decisions of individuals as consumers and as suppliers of labour are made on the basis of these prices. As a result of these decisions the quantity demanded and supplied of each commodity is determined. If the quantity demanded of a commodity is not equal to the quantity supplied the price of that commodity has to be changed. It has to be raised if demand exceeds supply and lowered if the reverse is the case. Thus the Central Planning Board fixes a new set of prices which serves as a basis for new decisions, and which results in a new set of quantities demanded and supplied. Through this process of trial and error equilibrium prices are finally determined. Actually the process of trial and error would, of course, proceed on the basis of the prices historically given. Relatively small adjustments of those prices would constantly be made, and there would be no necessity of building up an entirely new price system.

The capitalist system is far removed from the model of a competitive economy as elaborated by economic theory. And even if it conformed to it, it would be, as we have seen, far from maximizing social welfare. Only a socialist economy can fully satisfy the claim made by many economists with regard to the achievements of free competition.

Human needs, although originally derived from biological necessity, are thus a result of the existence of society and are conditioned by the stage of development which society has reached.